Oil continued its downward march Thursday as mass layoffs pushed the U.S. economy deeper into recession, signaling a drastic pullback on energy spending.

Light, sweet crude for February delivery, fell $1.07 to $43.54 barrel on the New York Mercantile Exchange. The January contract, which closes on Friday, fell $1.42 to $38.64 after dropping as low as $37.68, levels last seen in the summer of 2004.

There is no demand for oil right now, said analyst Peter Beutel of Cameron Hanover.

Higher prices for the February contract suggest that oil brokers and traders believe OPEC’s unprecedented 2.2 million-barrel daily production cut, announced Wednesday, will tighten supply. The Organization of Petroleum Exporting Countries had already taken 2 million barrels of oil out of production, bringing total cuts to more than 4 million barrels per day.

“The market is saying OPEC cuts will have an impact but just not right away,” he said.

Economic data continues to paint a dire situation in the U.S., Europe and Asia.

The U.S. Labor Department reported Thursday that new applications for jobless benefits fell to a seasonally adjusted 554,000 for the week ended Dec. 13, from an upwardly revised figure of 575,000 the previous week.

Still, the four-week moving average, which smooths out fluctuations, increased slightly to 543,750 claims, the highest since December 1982. The labor force has grown by about half since then.

Large layoffs are occurring across many sectors of the economy. On Wednesday alone, hard drive maker Western Digital Corp., managed-care company Aetna Inc., and Newell Rubbermaid Inc., maker of products including Rubbermaid storage containers and Sharpie pens, announced mass job cuts.

Pharmaceutical company Bristol-Myers Squibb Co., International Paper Co. and Bank of America Corp. also announced layoffs in the past week.

JP Morgan on Thursday cut its 2009 price target for oil to $43 a barrel from $69, citing “ongoing deterioration in the world economic environment and the ensuing sharp contraction in global oil demand in both 2008 and 2009.”

Oil prices have tumbled 73 percent since July. What started as a crisis in the U.S. subprime mortgage sector last year has mushroomed into a recession in most developed countries and a sharp downturn in emerging nations.

Actions by OPEC and tumbling fuel prices have failed to stimulate demand.

“OPEC is virtually powerless right now,” said Jim Ritterbusch, president of Ritterbusch and Association. “They’ll simply have to be patient and wait for some semblance of demand improvement.”

Beutel said it could be several more months before there is a response to lower prices.

Retail gas prices, which hit a low of $1.656 a gallon on Friday, rose 0.3 cents to $1.67 a gallon Thursday, according to auto club AAA, the Oil Price Information Service and Wright Express. It is the third consecutive day of price increases, but is still down from $2.068 a month ago and $2.99 a year ago.

China on Thursday cut prices for gasoline, diesel and jet fuel as the government tries to revive economic growth.

The price of diesel is being cut 18 percent while the price of gasoline will fall by 13.8 percent, effective Friday, according to the country’s planning agency, the Cabinet’s National Development and Reform Commission. Jet fuel prices will fall by 32 percent.

The cuts will help trucking companies, airlines, factories and others that are being squeezed by high fuel prices and a slump in sales.

In other Nymex trading, gasoline futures rose 2.8 cents to $1.0338 a gallon. Heating oil rose less than a penny to $1.45 a gallon while natural gas for January delivery fell less than a penny to $5.604 per 1,000 cubic feet.